Poison Pill in Japan

Abstract

Due to an extended economic downturn, Japanese corporations have started selling their cross-held shares, which has increased the amount of floating stock released into the market. Also, Japanese corporate law has undergone significant changes, including the relaxation of corporate restructuring and strengthening of corporate governance, making it more difficult for management to reject hostile offers with a significant premium. Based upon these two factors, the risk of hostile acquisition is now becoming “real” for Japanese corporations. In response to the increased possibility of hostile acquisitions in Japan, academics and practitioners have been discussing defensive measures. In almost all cases, the discussions refer to defensive measures employed in the United States, with the poison pill being mentioned in particular because it is the most popular and effective type of defensive measure. In this paper, I would like to discuss the legal issues relating to the poison pill in the context of Japanese law and present possible versions of the Japanese poison pill.